Question

The comparative condensed income statements of Marks Corporation are shown below. MARKS CORPORATION Comparative Condensed Income Statements For the Years Ended December 31 2017 2016 Net sales $620,000 $500,000 Cost of goods sold 450,000 400,000 Gross profit 170,000 100,000 Operating expenses 54,000 40,000 Net income $116,000 $60,000 Prepare a horizontal analysis of the income statement data for Marks Corporation using 2016 as a base. (Round percentages to 1 decimal place, e.g. 12.1%.) MARKS CORPORATION Condensed Income Statements For the Years Ended December 31 Increase or (Decrease) During 2016 2017 2016 Amount Percentage Net sales $620,000 $500,000 $ % Cost of goods sold 450,000 400,000 % Gross profit 170,000 100,000 % Operating expenses 54,000 40,000 % Net income $116,000 $60,000 $ % Prepare a vertical analysis of the income statement data for Marks Corporation in columnar form for both years. (Round percentages to 1 decimal place, e.g. 12.1%.) MARKS CORPORATION Condensed Income Statements For the Years Ended December 31 2017 2016 Amount Percentage Amount Percentage Net sales $620,000 % $500,000 % Cost of goods sold 450,000 % 400,000 % Gross profit 170,000 % 100,000 % Operating expenses 54,000 % 40,000 % Net income $116,000 % $60,000 %

Answer 1

Marks Corporation

1. Horizontal Analysis:

2017 2016 Increase %

Net sales $620,000 $500,000 $120,000 24%

Cost of goods sold 450,000 400,000 50,000 12.5%

Gross profit 170,000 100,000 70,000 70%

Operating expenses 54,000 40,000 14,000 35%

Net income $116,000 $60,000 56,000 93%

2. Vertical Analysis:

2017 % 2016 %

Net sales $620,000 100% $500,00 100%

Cost of goods sold 450,000 72.6% 400,000 80%

Gross profit 170,000 27.4% 100,000 20%

Operating expenses 54,000 8.7% 40,000 8%

Net income $116,000 18.7% $60,000 12%

Step-by-step explanation:

Data and Calculations:

MARKS CORPORATION Comparative Condensed Income Statements For the Years Ended December 31

2017 2016 Increase %

Net sales $620,000 $500,000 $120,000 24%

Cost of goods sold 450,000 400,000 50,000 12.5%

Gross profit 170,000 100,000 70,000 70%

Operating expenses 54,000 40,000 14,000 35%

Net income $116,000 $60,000 56,000 93%

For the horizontal analysis, the 2017 figure is compared to the 2016 figure. The Percentage increase is the difference divided by the base year, 2016's figures, before being multiplied by 100.

For the vertical analysis, the base is the sales figure. The relationship between the sales and other elements are established through ratio analysis.